Common Mistakes in Filling of Income Tax Return (ITR) Form

Reasons for mistakes in Filing Income Tax Return

Common Mistakes filing income Tax REturnThe accurate and complete filling up of the relevant column or detail in the Income Tax Return (ITR) form is most crucial for correct calculation of income.

In case the computation of Income or refund is different than what had been entered or what is expected, please verify the accuracy of the data entered by you in the ITR.

Except for limited number of complicated tax returns, for most taxpayers, the simple check points are the following:

Salary from all employers, irrespective of whether Form 16 has been issued or not, should be entered in Item 1 of ITR 1 or details in Schedule Salary in ITR 2.

Interest income from fixed deposits, savings bank account etc should be entered in Item 3 viz. Income from other Sources of ITR 1 or Schedule OS-Income from Other Sources in all other ITR’s.

House Property Income. Schedule HP should be filled carefully including the address details. Income from House Property should be entered in Item 1a viz. Annual letable value/ rent received/ receivable. Municipal taxes paid should be entered in Item 1c viz. tax paid to local authority in Schedule HP-Income from House Property.

  • A flat deduction of 30% of the amount in Item 1e is the only deduction permissible for repairs and such expenses will be auto-populated in Item 1f of Schedule HP.
  • Deduction for Interest on housing loan should be entered in Item 1g viz. Interest payable on Borrowed Capital and is restricted to Rs 1,50,000 for ‘Self Occupied’ house. Therefore, correctly mention whether the house property is Self-Occupied or Let Out in Schedule HP.
  • Accordingly, the final value of Income from House Property will auto populate in Item 1i.
  • In case of multiple house properties do not use ITR-1, details of each house property have to be entered completely as mentioned above.
  • In case of ITR-1 , the House Property loss should be entered as a negative (-) value in the ‘Income from House Property’ column.

Income from Short Term Capital Gains should be entered in Item A of Schedule CG-Capital Gains.

  • Out of value auto-populated in column “Total Short Term Capital Gains”, the amount of STCG attributable to STCG from sale of equity share in a company or a unit of an equity oriented mutual fund, typically, should be entered in column namely, ‘Short term capital gain under section 111A included in 4′.
  • Moreover, the STCG under 111A as entered in column referred above is taxed at a lower flat rate of 10%
  • The residual value, where the STCG is due to sale of assets other than Equity Shares in a Company or Unit of an Equity Oriented Mutual Fund, if any, will auto populate in the column named, ‘Short term capital gain other than referred to in section 111A’
  • The STCG due to sale of assets other than equity share in a company or a unit of an equity oriented fund is taxed at the normal slab based rates of tax.
  • Most mistakes in STCG are due to incomplete filling of the Schedule CG, incorrect apportionment of Total STCG into STCG on which Section 111A is applicable & STCG on which Section 111A is not applicable.

Income from Long Term Capital Gains should be entered in Item B of Schedule CG-Capital Gains.

  • For Long Term Capital Gain (LTCG), the total value of consideration received for assets sold such as house property etc, typically, should be entered in Column ‘Other Assets for which option under proviso to section 112(1) not exercised’ in case the benefit of indexation is claimed.
    • Against this value of consideration received, the indexed cost of acquisition / improvement and allowable expenditure etc should be entered in appropriate columns provided thereafter.
    • The appropriate exemptions, if any, shall be entered in Column provided therein and the amounts will populate automatically wherever necessary.
    • LTCG in case of ‘Asset in the case of others where proviso under section 112(1) not exercised’ Column of ITR 2 is taxed at a flat rate of 20% and the benefit of indexation is allowed.
  • Where the benefit of indexation is NOT claimed then total value of consideration received for assets transferred, should be entered in ‘Other Assets for which option under proviso to section 112(1) exercised’ column
    • Against this consideration, the cost of acquisition / improvement and allowable expenditure etc should be entered in relevant columns provided in Schedule CG.
    • The appropriate exemptions, if any, are filled in column provided for the same & amounts will auto populate automatically wherever necessary.
  • LTCG in case of in ‘Other Assets for which option under proviso to section 112(1) exercised’, where the benefit of indexation is NOT allowed, as being displayed in the named column is taxed at a lower flat rate of 10%.
  • The assessee is required to segregate the information date wise in Column D of Schedule CG, regarding Accrual or Receipt of Capital Gain failing which Interest under Section 234C will be wrongly calculated.

Adjustment of current year and brought forward losses- Schedules CYLA, BFLA and CFL

Most taxpayers have left these Schedules completely blank. These schedules are used for permissible adjustment of loss of one head of income against another head of income. The main checkpoints are:

  • Only positive values need to be entered. No negative value is required to be entered in CYLA, BFLA & CFL.
  • Carry forward of Current year losses though claimed in return will not be allowed if the return is not filed within due date.
  • No value should be entered in the ‘Greyed out’ boxes.
  • The Amounts in Schedule CYLA/BFLA will populate automatically, however assessee will be allowed to claim loss in Schedule BFLA only if appropriate columns have been entered in Schedule CFL.
  • It is to be noted that the newly introduced Schedule namely Schedule UD currently is not linked with Schedule BFLA, therefore the assessee is required to mention the Brought Forward Depreciation amount separately in Schedule BFLA for claiming the loss arising from the same.

Income chargeable to Income tax at special rates- Schedule SI

Most mistakes have occurred in this Schedule since taxpayers have not correctly filled the codes, rates or values. The following points may be considered:

  • Currently the Income Tax forms do not have Individual Columns for segregating DTAA income from Non DTAA income under each head of income therefore, the taxpayer is advised to give details of DTAA income & Tax thereon in Schedule SI.
  • Also, any special income other than Capital Gains income the figures for which auto populate from Schedule CG, the assessee is required to mention it in Schedule SI only & that income shall not be specified separately under any other head.

Deductions from Income under Chapter VIA

  • Most mistakes have occurred due to incomplete details or leaving blank the value of deductions under respective schedules. In most cases only the total deduction value is mentioned.
    • The deduction amount claimed should be entered in Items 5a to 5m in ITR 1 and in Items a to o in Schedule VIA in ITR 2.
    • Eligible donation for the purpose of deduction under 80 G for donations to charitable institutions (other than certain specified institutions or funds such as Prime Minister’s Relief Fund or Rajiv Gandhi Foundation) is restricted to 10 % of total income after excluding income chargeable to special rates of tax.
    • Likewise, all deductions have specific criteria and limits for claims. In the present utility a user enterable field for claiming deduction has been mentioned & correspondingly System Value for deduction claimed is also mentioned for the benefit of the assessee.
    • The sum of all deductions also cannot exceed the total income.
    • Deduction cannot be claimed against income chargeable to special rate tax.
  • Reasons for difference in calculation of Tax or Interest under 234A, 234B or 234C and Interest on Refund.
    • Mistakes in computation of Income as mentioned above leading to an increase in Income.
    • Mistake in entering data or Income chargeable to tax at special rates such as STCG on sale of shares, LTCG where indexation benefit is claimed, winnings from lottery.
    • Incorrectly computing special rates of tax.
    • Mistakes in entering data or leaving blank, important fields relevant for computation of tax such as date of birth (relevant for senior citizens) or gender (relevant for female taxpayers), resident or non-resident, status (relevant in case of HUF).
    • In case of any shortfall of tax payment either due to non-payment or due to non-matching of the tax payment or TDS, interest may be charged.
    • Typically, interest till the date of processing under 234A is charged if the return is filed beyond due date, interest under 234B is charged for shortfall in payment of advance tax and interest under 234C is charged for deferment of advance tax.
    • Interest under 234C is also charged in case advance tax on account of STCG under 111A, LTCG or Winnings from lotteries is not paid, beginning from the next quarter from the quarter in which the income is earned.
    • Details of quarter wise breakup of STCG, LTCG and Winnings from Lottery as mentioned in Schedule SI after adjustment of Losses and adjustment of basic exemption threshold, if applicable, are used for calculation of advance tax liability and interest under 234C.
  • Reasons for mistakes in Credit for tax payments or TDS
    A major reason for difference in refund amount during processing is that the details of tax payment or TDS do not match with the data available with the Department. The critical checkpoints are as under:

    • Corresponding deduction of tax (TDS) on salary by all Employers should be correctly entered in Schedule TDS1 in ITR1 or Schedule TDS 1 for ITR 2.
    • TDS on salary should be entered in Schedule TDS1 ONLY and TDS on other Income should be entered in Schedule TDS 2 ONLY.
    • Tax deduction Account Number (TAN) of the Employer/Deductor is the unique identifier for matching TDS claims made against TDS reported by Employer/Deductor.The TAN number is mentioned on the Form 16 given by the Employer or on the Form 16A given by the Deductor. In case the TAN of the Employer/Deductor is not correctly mentioned, no matching is possible and TDS credit will not be given.
    • If the TAN has been correctly entered but the Employer/Deductor does not report the same TDS details to the Department, especially the taxpayer Permanent Account Number (PAN), then also the TDS cannot be matched. Therefore it is advised to check Form 26AS for the amount which has already been deposited by persons deducting tax on behalf of the taxpayer. Thereafter, the taxpayer should bring this fact in the notice of persons deducting tax so that they can act accordingly.
    • In case of Tax payments of Advance tax or Self Assessment tax, the PAN used to submit the tax challan to the bank should be the same as the PAN used to submit the return. Without a valid PAN the tax payment received from the bank would be in suspense and cannot be matched with tax payment claim as entered in the return.
    • While making the tax payment at the Bank, NO MISTAKE should be made in the challan while entering the PAN, Name, Major head (20 or 21), Assessment Year, Type of tax payment {advance tax (code 100), Self Assessment tax (code 300)}, tax applicable (Income tax other than companies).
    • Any tax payment made under code 400 corresponding to ‘Tax on regular Assessment’ cannot be used for matching and accordingly credit cannot be given against advance tax or self assessment tax claims.
    • The Challan Identification Number (CIN) is the combination of BSR code (any bank branch’s unique 7 digit identification number issued by RBI), date of deposit of challan (DD-MM-YY), and the running serial number of the challan, and is mentioned by the Bank while accepting tax payment on its seal. In case this is not clearly legible, the Bank can be requested to provide correct details. This must be entered correctly in the return while claiming credit.
  • Miscellaneous mistakes:
    Mistakes in address etc do not affect processing but cause mis-delivery or non-delivery of communication or in case of Bank Account Number error cause rejection of refund credit to taxpayer account. The following points may be noted:

    • The name in the return should be entered as it appears in the PAN card.
    • Address should be correctly filled with correct city, state and PINCODE for faster and accurate delivery of communication from the Department.
    • For faster credit of Income Tax refunds, correct bank account number and MICR code in the return should be mentioned. In case of any mistake in MICR or Bank Account number, the refund will not be credited. and a cancelled cheque showing correct particulars would be required to be submitted to CPC for correction in bank account number or MICR code.
    • Do not Copy/Cut/Paste the data in the utility. It may lead to calculation errors.
    • In case of Refunds below Rs 100, no refund is issued and if Demand is below Rs 100, it need not be paid.
  • How to rectify the mistake and to get the correct refund
    Mistakes in the ITR due to any of the reasons may be corrected by submitting a rectification form. Some basic information is provided below:

    • The procedure for rectification and correction of mistakes is available in HELP on the website.
    • In case of any difference in Date of Birth or Gender in the Department records or in case of any need to correct the data, it may be corrected by submitting a PAN Change Request Form (quoting the existing PAN) with correct details and providing relevant documents at any TIN facilitation center.
    • In case of any mistake in MICR or Bank Account number , please raise a request after logging in to e-Filing application under ‘My Account’ –> ‘Refund Re-issue request’.
    • In case the charging of additional tax and interest is only because of non- matching of tax payment or TDS, upon correction of the details by taxpayer or employer / deductor, the additional tax and interest will be automatically reduced or eliminated.

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  • JASBIR

    IN E FILING HOW TO SHOW NEGATIVE INCOME FROM HOUSEI i.e TAX INTEREST PAID ON HOME LOAN

    • http://www.indiantaxupdates.com/ Sanyam Jain

      Same as you show positive income under the respective heads but with a negative sign.

  • Krishna Priya

    Is it a must to enter PAN number of the buyer also while I wish to remit the tax on Long term capital gains as my buyer is reluctant to give me the details

    • thesanyamjain

      Yes, else they would not get the tax credit of the tds paid and deducted.

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